Have your clients paid high Inheritance or Gift taxes in Spain in the past?

Gunnercooke

Pursuant to the European Court of Justice´s decision of the 3/9/2014 they could be entitled to ask for a refund

The Spanish inheritance and gift tax is a national tax but the Spanish Government transferred it to the regional bodies (autonomous communities), who have autonomy to legislate and collect the tax. The autonomous communities have legislated a number of tax benefits that are applicable to taxpayers, resident in their regions.

The key point is that most of the Autonomous Regions have introduced tax benefits to their residents, i.e. in the Balearic Islands (Mallorca, Ibiza or Menorca) the inheritance transfers between immediate family members, if they are residents, are taxed with a maximum of 1% in most estates.

The problem is when we are talking about non-Spanish residents because the tax is not transferred to the regional bodies and the state rules apply without the said benefits. This implied that in the past a person who was not resident in Spain was paying a higher Inheritance tax than a person who was resident in that country. This was clearly a discrimination within the EU and many groups of affected individuals and professionals complained before the EU Courts.

In 2007 the European Commission sent a warning to Spain about a potential incompatibility between the Spanish inheritance and gift tax rules with Articles 21 and 63 of the TFEU and Articles 28 and 40 of the EEA. The Commission formally requested Spain on the 5th May 2010 and 17th February 2011 to take action to ensure compliance with EU rules. As Spain failed to take action, the Commission decided to take Spain to the CJEU and the European Court of Justice declared in its Decision dated 3th of September 2014 that this legislation breached the free movement of capital and it was contrary to the European laws. Spain was therefore forced to amend its legislation in that way.

Knowing that at present the inheritance or gifts between non-Spanish residents have the same benefits that residents have, the key questions are:

What about the taxes already paid by non-Spanish residents before that European Decision? Can we claim a refund for the excessive taxes?

The effects of the CJEU Decision 3/9/14 are not temporary limited and therefore if your clients have paid the inheritance or gift tax in Spain as a non-resident they should be able to claim for the reimbursement of the excess paid.

We would recommend contacting a Spanish Lawyer to review the Inheritance or Gift taxes already paid by your clients in Spain before 2014, and more importantly, if your clients are going to pay taxes in the following months, a Spanish Lawyer will also help them to decide the best way to minimise taxes, without the need to appeal for a refund.

On the other hand, we would also recommend your clients when buying in Spain, to consider the different tax rates and take into account the different regions and their tax rule, before deciding where to buy. We all know that laws can change, but why do not take this into account if it can help clients to save some money?

Claudia Font & Antonio Guillen

Spanish lawyers at gunnercookellp

1 Cornhill London EC3V 3ND 53 King Street Manchester M2 4LQ

 

E-mail: claudia.font@gunnercooke.com       E-mail: antonio.guillen@gunnercooke.com

D: 07788585115                                                  D: 07872808598

 

 

Buying property in Barcelona

old medieval street

 

 

 

 

 

 

 

 

 

Barcelona is probably one of the most beautiful cities in Europe. Woody Allen tried to show it in his famous film “Vicky Cristina Barcelona” although he excesively focused on the usual landmarks and buildings, forgetting that there is beauty in many other places apart from the usual constructions from Gaudi. However, it still was a good marketing tool for the city.

Property wise, Barcelona has suffered like any other city in Spain. Property prices have fallen for the last 5 years although 2013 has brought some interesting news. According to the Real Estate website www.idealista.com , property prices in Barcelona fell by only 1%. This may look like bad news to most of you but the reality is that the forecast was for a fall of at least 7% to 8%. What has happneed then? La Vanguardia newspaper thinks that this reduction in the decline of prices is due to Foreign Buyers. In fact, the said newspaper estimates that 10% of those who buy in Barcelona are probably foreign, being Russians, Chinese and Indian the nationalities that are showing more interest in the city followed by the usual British, French and other Europeans.

One of the reasons for this increase in interest from non-European investors is the so called “Golden Visa” which grants immediate residency rights to any non-European investing more than 500,000 Euro in property in Spain. At the same time, many Foreigners look at Barcelona’s potential in the touristical rent market. The city is used for long weekend breaks, stag does, romantic breaks and many others and in most cases those travelling to Barcelona use touristical apartments rather than Hotels, being this type of accomodation an alternative with some relevant success.

So, what should you do if you are interested in buying a property in Barcelona? The first thing you should do is take a holiday in Barcelona and explore the city. Your budget and motives shoud vary depending on whether you are looking to buy a first home, a second home or an investment. Many Estate agents speak English and they should be able to point you in the right direction. Once you find a property that you like, the agent will probably ask you to pay a reservation of a few thousand euro or perhaps even a deposit. This is where the lawyer work starts and where you need to tell the agent that you will instruct your own lawyer for the transaction.  You will be told that there is no obligation to instruct a lawyer in Spain and that there is a professional called “Notary Public” who can prepare all the documentation. Yes, that is correct in a way but it is still very advisable to instruct your own lawyer in the same way that you would do in the UK.

The lawyer (abogado in Spanish and advocat in Catalan) will check all the documentation and advise you before you enter into any contracts. He will also carry out searches to check the planning situation and whether the property can be let out as a touristical apartment. You can find Spanish lawyers in Barcelona, of course, but also in the UK. It is up to you to decide which lawyer you want to use. Some investors prefer to use a Spanish lawyer based in the UK because they are regulated by the UK Law Society, others prefer to use someone local. The important thing is to instruct an independent Spanish lawyer and not to proceed with the purchase without independent advice.

Enjoy the city!!

Antonio Guillen is a dual qualified Spanish lawyer- English Solicitor from Barcelona who is currently practising in the UK.